Occupier Rent Relief Request Checklist

April 17, 2020

As we are forced to adapt to the continued response to the coronavirus outbreak, including “Stay Home-Work Smart” orders, increased strain on the economy has created significant hardships for businesses. Revenues have flattened and many business owners are having to make tough decisions to keep their companies moving forward.

In an effort to implement cost cutting strategies, commercial space occupiers may want to explore options and open communication with their landlords to establish some rent relief in the near-term. And with virtually no industry left unaffected by these economic conditions, landlords may be more willing now to consider fair proposals.

Rent Reduction

A landlord can reduce the occupier’s rent for a portion or possibly the duration of the remaining term left on the lease by lowering the base rent, operating expenses or both. To make this more palatable, you may consider discussing an extension to tack on to the back end of your initial term, providing additional longer-term stability for your landlord.

Rent Deferral

With a rent deferral a tenant can receive immediate rent relief but would be required to repay the rent at a later time, either in a lump sum or in a series of payments. Not having to pay rent up front would allow occupiers to continue to pay out on payroll or other obligations to keep their businesses open until revenues have a chance to normalize after the economy fully reopens.

Rent Abatement

Approaching your landlord with an early renewal may give you the leverage to secure some abated rent now in return for additional term. Of course, the amount of abated rent will depend on how much term is added as landlords will be far more willing to negotiate with a tenant who might be in place for several more years.

Application of Deposit

If the landlord currently holds a deposit on your space, they could agree to apply this amount to be credited against the tenant’s rent, while allowing the tenant to replace the security deposit over time. This option does open landlords up to more risk as they could be left without a deposit to apply towards damages.

Pursuing Government Relief Packages

Some landlords may require tenants to seek available resources from government bailout plans, like SBA EIDL or PPP loans before discussing other relief options. Landlords may agree to a clawback of deferred rent upon the tenant’s receipt of government funds.

Sublease

Occupier’s may also identify a subtenant to lease a portion of their existing premises to help reduce overhead.

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